Gold at seven-month low as US dollar, yields extend rally

Oct 3 – Gold prices languished near a seven-month low on Tuesday, weighed down by a robust dollar and elevated bond yields as the likelihood of US interest rates staying higher for longer dominated sentiment.

Spot gold was down 0.1% at USD 1,825.09 per ounce at 1:49 p.m. EDT (1749 GMT), after hitting its lowest level since early March.

US gold futures settled 0.3% lower at USD 1,841.50 per ounce.

US job openings unexpectedly increased in August, pointing to tight labor market conditions that could compel the US Federal Reserve to raise interest rates next month.

“The JOLTS report has surprised the market as it raises prospects of another hike but also lowers expectation of a slowdown in the US economy, pressuring precious metals,” said Edward Moya, senior market analyst at OANDA.

Gold is considered a hedge against inflation and economic uncertainties. But higher interest rates raise the opportunity cost of holding bullion, which is priced in dollars and does not yield interest.

Gold prices briefly ticked up earlier in the session as the dollar sharply weakened against the yen, just moments after briefly rising above 150 for the first time since October 2022, signaling a possible intervention by the Bank of Japan.

“If the Bank of Japan intervenes, it could weaken the dollar in the short term and provide some support to the precious metals,” Moya added.

The market focus is now on September nonfarm payrolls data due on Friday.

“We reiterate our 12-month target of USD 1,725 per ounce and remain cautious on gold,” said Julius Baer analyst Carsten Menke.

Spot silver rose 0.6% to USD 21.20 per ounce. Platinum fell 0.7% to USD 871.40.

Palladium, primarily used by automakers, slipped 1.5% to USD 1,183.20, its lowest since late 2018.

“Palladium looks structurally challenged because demand is geared towards cars with an internal combustion engine,” BofA wrote in a note dated Oct. 2.

“Palladium may be the first casualty of the energy transition.”

(Reporting by Ashitha Shivaprasad in Bengaluru; editing by Christina Fincher and Alexander Smith)